China Plies Central Asia With Loans

June 15, 2006: Shanghai Cooperation Organization leaders Russian President Vladimir Putin (L) and Chinese President Hu Jintao toast after signing a bank agreement between the two nations after a meeting in Shanghai. Photo: AFP

China is using its economic muscle to compete with Russia for influence in Central Asia, raising tensions within the Shanghai Cooperation Organization (SCO), analysts say.

The race for access to the energy-rich region was a subtext of the recent Shanghai summit of the six-nation security group. Experts say China used the lavish June 15 meeting of leaders including Russian President Vladimir Putin to showcase its strength with a series of low-interest loans to Central Asian states.

At ceremonies on the sidelines of the summit, China distributed some $900 million for energy, business, and transport projects in Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. The four Central Asian nations along with China and Russia form the six member states of the SCO.

In interviews with Radio Free Asia, experts said that Russia’s concern has been growing over China’s inroads into a region that it has long viewed as its own back yard.

S. Frederick Starr, chairman of the Central Asia-Caucasus Institute at the Washington-based Nitze School of Advanced International Studies at Johns Hopkins University, said “there’s no question but that China founded the Shanghai group. Russia was brought in as a junior partner.”

“Putin has muscled his way into a more prominent role,” Starr continued, “but they’re not making the loans, and they’re not offering nearly as much as the Chinese as a result.”

There’s no question but that China founded the Shanghai group. Russia was brought in as a junior partner,

Starr said that Russia and China are competing in Central Asia not only with infrastructure projects and pipelines, but in trade.

“If you go to the cloth market in the [Kyrgyz capital] Bishkek, the biggest in Central Asia, ten years ago it was completely dominated by Russian goods. Today, it’s 100 percent Chinese,” Starr said.

Starr added that China and Russia have also competed in matters related to SCO policy. At an SCO prime ministers meeting held in Moscow in October, the two countries disagreed over a resolution urging U.S. withdrawal from bases in Central Asia.

China made sure that the resolution did not mention the United States by name, Starr said.

Jin Huang, a senior fellow in foreign policy studies at The Brookings Institution in Washington, agreed that the spread of China’s influence in the former Soviet republics in Central Asia has put Moscow on guard.

Huang said that China’s loans for highways and other infrastructure projects point to long-term involvement. This suggests that China’s goal is strategic engagement in Central Asia, Huang said.

“You can see that China has made, in my view, a bigger plan, which is to try to organize those Central Asian countries into a kind of international regime, not just for energy but also for security and other political purposes.”

But Starr said that while China and Russia may be rivals in the region, countries like Kazakhstan have been trying to steer a steady course between them.

Starr noted that the Kazakh policy is “absolutely clear.”

“It puts three relationships on an absolutely identical equal footing, namely a strategic partnership with Russia, but also a strategic partnership with China and also a strategic partnership with the United States.”

“Russia’s not comfortable with this arrangement,” Starr added, “but it’s a reality, and I believe it will become a model for all countries in the region.”

Original reporting by Michael Lelyveld. Edited for the Web by Richard Finney.